This paper presents the principles for an on-line microwave-based monitoring system for power grid components. Such systems would be able to provide diagnostic information about the component in real time. The microwave propagation in complex waveguide structures, here representing the interior of the power grid components, is studied with the aim to detect and quantify shape or material changes with sufficient accuracy. Electromagnetic field analysis in conjunction with inverse problem theory is used to reconstruct the material and shape parameters. In this paper, we present preliminary results for reconstructions of two-dimensional localized deformations of a waveguide boundary, representing the inner structure of a power grid component.